Understanding a Paycheck

Wow! The old saying, “hard work pays off” is surely true.
The Crane Folding Factory was a success. You went above and
beyond your production goals. You were able to make more
cranes than you committed to making. Focusing on one job on the
assembly line helped everyone to accomplish the goals. Never
before has one class of 4th graders folded over 1000 paper
cranes in one day. That was a phenomenal job!!!
It’s payday and soon you’ll be cashing your checks. How did
the CEO of Hartman’s Crane Folding Factory figure out your
check? Why did you make the amount that you did?
In the real world everyone earns a different amount of
money. Some people are paid on a salary, like your teachers, and
some people are paid hourly, like someone who works in a factory.
On a salary, the employee makes a certain amount of money no
matter how many hours he or she works. An hourly employee
makes a certain amount per hour. A full week is considered 40
hours. Any work after 40 hours is considered overtime.
Those who work extremely hard can sometimes end up with
bonus pay. The employer sees that the employee did an
exceptional job and gave him extra money on his paycheck.
Bonuses were given for exceeding your production rate. For
every 5% above your production goal, you earned an additional
$100.00.
Sometimes an employee works for commission and a base
rate. Commission is a percentage of sales. For example, if you
sold a crane for $10.00, your commission will be $1.00 at a 10%
commission rate. So if you sold 10 cranes for $10.00 each, you
would have $100.00 dollars in sales, but your commission (the
money on your paycheck) would be 10% of $100.00, which is
$10.00. The base rate is an amount you get for just coming to
work for the day.
In a great situation, an employee can make some extra
money with gains sharing. Gains sharing is when the factory
makes so much that they share the profits, or money that is
made, with the employees of the factory.
We are going to pretend that you worked in the factory a
full two weeks. Every employee in Hartman’s Crane Folding
Factory earned a base rate, a commission on the number of
cranes, and bonuses for exceeding your production rate. Some in
the factory had the opportunity to earn overtime pay and some
earned gains sharing. When you add all the pieces together you
get your gross pay. In this case, gross pay does not mean that it
is yucky. As a matter of fact, it means that it is the total of all
the money you made for the pay period. This is the amount you
make before you have to pay taxes.
Everyone who has a job has to pay taxes. You have to pay
taxes to the federal government and to the state government.
That is how the government makes money and pays for what they
need to help the people. The federal government takes about
23% of your gross pay and the state government takes about 7%
of your pay. Percentages are a little hard to understand, so here
is another way. If your pay was divided into ten equal parts, you
would get seven parts and the government would get three parts.
The amount that you see on your paycheck is your net pay, or the
amount you get to take home after the taxes are taken out.
After a person receives a paycheck, that person needs to
make sure to pay their bills, or the amount of money they owe to
someone. You will have the opportunity to spend your money in
math class. Before you get what you want, you have to pay three
bills: your housing bill, your transportation bill, and your food bill.
These are all necessary for living and before you can have fun
with your money, it is important to make sure you have these
three things. After paying these bills, you can go shopping at the
store, plan a vacation, or give to charity (a place in need of money
and that helps people).
Have fun budgeting and spend wisely!!!
 Name _______________________
Homeroom ____________________

Paycheck Vocabulary
Directions: Write the letter of the definition on the line that
matches the word.

____ production goal a. amount paid for working

for the day
____ salary b. the total amount you earn
in a pay period
____ overtime c. doing one job in a line

____ employer d. the person who runs the

business
____ employee e. sharing the money with the
employees
____ assembly line f. a percentage you make from
each sale
____ bonus pay g. the amount you decided to
try to make
____ base rate h. the amount you get on your
paycheck after taxes
____ commission i. working more than 40 hours

____ gains sharing j. the amount you make no

matter how many hours you work
____ profits k. the amount of money the
company makes
____ net pay l. the extra money you make
for doing a good job
____ gross pay m. the person who works for
the factory